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Givers and takers: the European Commission’s redistribution of nine members’ contributions

Whatever else it may be, the EU is a mechanism for the redistribution of wealth across its member countries. The Commission takes from nine wealthier, more developed members, and after taking roughly 6 per cent of all receipts for its own expenses, returns some of their contributions back to the nine, and re-distributes the rest to other, generally poorer, member countries.

This chapter reviews these decisions over the years 2000-2014 taking the evidence from the annual financial reports on its budget, which is fairly easy to do from 2000, since the data over these years is presented in a standard excel document. Earlier years are more difficult for various reasons, but a full account going back to 1973 is being prepared.

Of 28 member countries, 19 have been net beneficiaries over the fifteen years, in the sense that the funds received for projects in their country exceeded the contribution they made to the European Commission budget. Nine have been net contributors or donors.Chapter 13 - Givers and Takers table

Since member countries vary considerably in size, the table below presents these figures in the more intelligible form of the total sum received per capita over the entire fifteen years. Member countries are listed with the largest beneficiary, Luxembourg at the top, and the largest contributor, the Netherlands, at the bottom. An alternative, more user-friendly, bar chart version is also given below.

Over this period the status of beneficiary or contributor has been remarkably stable. Finland became a net beneficiary in 2000, 2002 and 2003, but these now look like aberrations. They have not been a net contributor since. Ireland became a net contributor in 2009 and 2014, but not enough time has passed to determine whether this is a permanent change in its status from beneficiary to contributor. Cyprus looked like it had made the transition from beneficiary to contributor in 2007 and continued as a contributor till 2012, but in 2013 became a beneficiary once more. Given the general stability of member countries’ status, it is surprising that it has not crystallized into a widely acknowledged distinction within EU debates.

The appearance of all the former Soviet countries in the net recipients section of the list is not unexpected, nor is the cluster of the wealthier Northern European countries among the net contributors. It is the anomalies that attract interest and curiosity. Simply so that they may be recognized more easily, the GDP per capita of the 29 countries in 2000 has been added in the right hand column. This makes it easier to see the order in which EU expenditure would have been allocated had it be done purely on the basis of need, equity or to create a level playing field.

The greatest anomalies, Luxembourg and Belgium, will be discussed in a moment. There are several other unexpected results. Ireland, for instance, is slightly surprising. It was a 1973 EU entrant, and has, over many of the years under review, also been by far the highest recipient of FDI per capita in the EU. Even in 2000 it had a higher per capita GDP than the Netherlands, the largest contributor. It is therefore odd that it should nevertheless have remained high among the recipients. However, as noted above, it became a net contributor in 2014, suggesting that, after it has resolved its financial problems, it may become a permanent contributor. Portugal and Greece also appear to have been fortunate recipients given their GDP in 2000.

All these are modest anomalies by comparison with the striking and curious position of Luxembourg at the top of the table of beneficiaries, since it means that the country with the highest GDP per capita at the start of the period, is also the country that received the highest proportion of the funds distributed by the Commission over these fifteen years. In Luxembourg’s case, the Commission has not been redistributing income from the wealthier to the poorer, but taking from the wealthier to give to the wealthiest.

This is, one imagines, somewhat embarrassing for the present President of the Commission when arguing about the budget and budgetary allocations with the UK or other states, given that he himself is from a state that, despite having the highest GDP per capita in the Union, has not contributed a single euro to it over the past fifteen years.

The position of its neighbour Belgium amongst the ex-Soviet beneficiaries is barely less curious than that of Luxembourg, especially as the Netherlands, the country making the highest net contribution per capita, is its neighbour.

The funds distributed by the Commission do not include, one must add, plant and administrative costs of EU institutions of which there are, of course, a good number in both Luxembourg and Belgium. These costs are accounted for in the six percent taken by the Commission from all the revenue received from member countries. The presence of many EU institutions cannot therefore explain why these two countries are major beneficiaries. There must be some other explanation.

The Commission evidently noticed the anomalous status of the two countries, and did its best to explain it, observing in notes accompanying its financial report in 2007 that ‘some expenditure allocated to Belgium and Luxembourg might be inflated due to the large number of multinational consultancies or ad-hoc companies based in these two Member States.’[1]

The puzzle remains. One of the fundamental questions for whomever it is that the Commission is accountable to, must be the rationale, wisdom and equity of all these distributive decisions. Perhaps the European Parliament, or the representative of the UK or some other member country, or the auditors have satisfied themselves that this distribution of funds has been appropriate, though I have yet to discover when and where this is done, or to find a EU document or supporter who can tell me.

I wrote to the European Commission asking for a fuller explanation in December 2015, and received a request for the lines of the budget to which I was referring, but three months later have received no explanation. One cannot help but think that if the EU had a demos, and was subject to active media scrutiny, the privileged status of the Luxembourg and Belgium would have long since formed the subject of investigation and analysis either by the Parliament or by muckraking.

Chapter 13 - Givers and Takers graph

 

 

Notes

[1] European Commission, EU budget 2007 Financial Report, p.29

http://ec.europa.eu/budget/library/biblio/publications/2007/fin_report/fin_report_07_en.pdf


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